If you have ever been through a business sale, outsourcing, or insourcing exercise, chances are someone muttered the word “TUPE”, and maybe everyone suddenly looked nervous!
But fear not, TUPE is not a completely insurmountable area of law. Remember, it is there to ensure employees are not left in the lurch when the business they are working for changes hands.
In this article, we will walk you through:
- What is TUPE?
- When does TUPE apply?
- When does TUPE not apply?
- What steps must employers take to stay TUPE compliant?
- TUPE FAQs
What is TUPE?
TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006. It is a piece of UK legislation designed to protect employees and employee rights when the business they work for changes owner. Essentially the legislation ensures that the staff and liabilities automatically move across to the transferee (the incoming employer) from the transferor (the outgoing employer).
TUPE makes sure that:
- Employees are able to continue being employed, even if their employer changes.
- Their terms and conditions remain the same (including pay, holidays, notice, and continuity of service).
- Certain protections against dismissal are put in place around the time of the transfer.
When Does TUPE Apply?
TUPE applies when a business or part of a business is transferred from one employer to another, whether through a sale, outsourcing, insourcing, or a service provision change.
TUPE applies in two main situations:
- Business Transfers
This is where an economic entity (an organised grouping of resources which has the objective of pursuing an economic activity) moves from one owner to another.
A transfer of an economic entity is most evident in a business sale, typically involving assets like equipment, premises, customers, staff, and goodwill. To determine if TUPE applies, it is important to identify the undertaking in question and assess whether it has transferred with its identity retained. Generally, if activities and customers remain the same and staff are still needed, then the identity is likely retained.
- Service Provision Changes (SPCs)
Common in outsourcing and facilities management, these include:
- Outsourcing (e.g. where a company outsources its catering to a third party)
- Changing contractors (e.g. switching cleaning service providers)
- Bringing services back in-house
To apply, the service must involve an organised grouping of employees whose principal purpose is carrying out the relevant activities which are switching from one employer to another.
When Does TUPE Not Apply?
TUPE is wide-ranging, but not limitless. It will generally not apply where:
- There is no organised grouping of employees doing the work that is transferring, making it hard to identify who transfers on a change of contract (e.g. where a courier company services a client using different ad hoc couriers, rather than an identifiable team).
- The activity is “one-off” or “single event” work (not ongoing).
- The transfer is within the public sector and the employer does not change (e.g. within the Civil Service).
- The business being transferred is non-UK based, and the employment is not sufficiently connected to the UK.
It is a piece of UK legislation designed to protect employees and employee rights when the business they work for changes owner.
What Steps Must Employers Take to Comply with TUPE?
Whether you are the outgoing employer (the “transferor”) or the incoming one (the “transferee”), you will have legal responsibilities. Here is what needs to happen:
- Identify who is transferring
Figure out which employees are “assigned” to the transferring business or service, as TUPE only applies to employees who are permanently assigned to the relevant undertaking or organised grouping of employees. You may need to consider the following to determine whether an employee is assigned or not:
– does the employee do other activities in practice?
– is the employee temporarily allocated to the group?
– physical proximity to other employees in the group.
- Provide Employee Liability Information (ELI)
The outgoing employer must give the new employer key information about the transferring employees, including:
- Identity and age
- Terms and conditions including any applicable collective agreements
- Disciplinary / grievance history
- Claims or potential claims
This must be provided at least 28 days before the transfer. If a transferor fails to comply with the ELI obligations, an Employment Tribunal may order it to pay the transferee compensation.
- Inform and Consult
Both employers must:
- Inform affected employees (or their representatives) about the transfer
- Consult on any measures/material changes expected to be taken in connection with the transfer in relation to the affected employees (e.g. relocation, payroll date, pension provider)
Failing to inform and consult can result in protective awards of up to 13 weeks’ gross pay per affected employee. Claims may be brought against either or both of the transferor and the transferee for failure to inform and consult.
- Respect Continuity of Employment
The new employer takes on employees as if nothing had changed. All their existing rights, obligations, and liabilities transfer with them.
TUPE FAQs (Quickfire Answers)
- Can I change employees’ contracts after a TUPE transfer?
Only in limited circumstances, and only if the reason is economic, technical, or organisational (ETO) and entirely unconnected with the transfer. Even then, the changes must be agreed with the employee. - Can I dismiss someone after a TUPE transfer?
Only if there is an ETO reason involving changes to the workforce, such as redundancy or where the reason for dismissal is entirely unconnected with the transfer. Otherwise, where the sole or principal reason for the dismissal is the transfer, the dismissal would be automatically unfair. - Does TUPE apply to a share sale?
Generally no, because the company remains the same entity (and therefore the identity of the employer remains the same) and only the shareholders change. - What should employers do if employees do not want to transfer?
- If an employee objects to the transfer, their employment will terminate on the date of the transfer, and they will not be entitled to redundancy pay or compensation unless they can prove that the transfer would have resulted in a significant detrimental change to their working conditions.
TUPE can be a legal minefield, but it does not have to be. With proper planning, early consultation, and the right advice, HR leaders can steer their organisations through transfers smoothly and safely.
We advise HR teams and businesses at every stage, from due diligence to managing risk post-transfer. Get in touch to speak to one of our employment law specialists.
